Commodity Corner: Oil Surges on Storm Threat
September oil futures settled at $79.30 a barrel Thursday, a $2.74 increase from the previous day as the possibility of a tropical system entering the Gulf of Mexico and disrupting offshore oil production becomes stronger.
According to the National Hurricane Center, Tropical Depression Three was centered approximately 425 miles east-southeast of Key West, Fla., as of 5 p.m. EDT Friday. Maximum sustained winds were 35 miles per hour and the system was moving in a northwesterly direction at 14 mph. Although an Air Force reconnaissance plane found no evidence of strengthening, forecasters expected the system to turn in a more west-northwesterly direction overnight and perhaps become a tropical storm by Friday. The system is expected to enter the Gulf of Mexico by Saturday and make landfall as a tropical storm anywhere from the upper Texas to Mississippi/Alabama Gulf Coast as early as Sunday afternoon.
Crude oil traded from $76.16 to $78.95 Thursday.
The prospect of the storm entering the Gulf also contributed to a 13-cent increase in front-month natural gas futures, which settled at $4.64 per thousand cubic feet. Also contributing to the rise was news from the Energy Information Administration that the country's surplus of working natural gas in storage has declined for the fifth straight week relative to the five-year (2005-2009) average.
EIA reported that working natural gas in storage increased to 2,891 billion cubic feet as of last Friday, which implies a net injection of 51 Bcf. In contrast, 70 Bcf of gas was injected during the same period in 2009; the five-year average is 64 Bcf. Working gas inventories are 52 Bcf lower than they were a year ago and 261 Bcf above the five-year average level.
The intraday range for natural gas was $4.51 to $4.72.
The August gasoline futures price settled 8 cents higher at $2.15 a gallon Thursday. Gasoline traded from $2.06 to $2.14 during the day's session.